Presentation given in Budapest, October 7 2014, on CEE agriculture at the conference organised by AKI at its 60th anniversary.

1. The future of the agro-food
sector in CEE economies
Krijn J. Poppe - LEI Wageningen UR
L One Decade of EU Membership: Lessons Leeaarrnneedd aanndd tthhee RRooaadd AAhheeaadd
ffoorr tthhee AAggrroo--FFoooodd SSeeccttoorr iinn CCeennttrraall aanndd EEaasstteerrnn EEuurrooppeeaann EEccoonnoommiieess
AAKKII 6600tthh AAnnnniivveerrssaarryy CCoonnffeerreennccee
BBuuddaappeesstt,, 77 OOccttoobbeerr 22001144

2. My introduction
Economist and Research Manager at
LEI Wageningen UR
My links with Hungary and AKI:
• First visit in 1992: Dutch project on
private farms in Hungary
• 2000/01 - Helping AKI to create the
FADN and other information systems
• Currently collaborating in the work of
the SCAR strategic working group AKIS
and in the EU project FLINT on
sustainability data in the FADN
Congratulations !

3. Content
• Characteristics of agri-food in CEE
• New technologies: ICT
• Can value be added, e.g. by meat
production based on cereals
• What does this mean for the future CAP ?
• And for research institutes like AKI ?

4. Characteristics agro-food
in CEE
• Very large, efficient farms (buying even
bigger machines), and many small
farmers and ‘farmers’ (struggling to be
included).
– Due to history:
• Yes/no land reform before 1940
• Choices made in the transition after 1989
• Food industry often not competitive for
western-European retailers
• CEE: a big commodity producer with
subsistence farming around.

5. Concentration in production in some European
countries. Source: FADN

6. Strong ICT Trends
• Satellite and (remote) sensing technology, geo-informatics
• Sensor technology, robotica in tractors and machines;
computer vision;
• Bio-sensors and bio-informatics
• Internet of Things: ‘everything’ gets an IP-address
• Cloud computing: service delivery via (broadband)
infrastructures
• Smart phones and tablets with data ‘in the cloud’
• Social media (Facebook, Twitter, Wiki, etc.)
• Web of data, Linked Open Data, Big Data
• E-knowledge, E-science

7. Smart Farming in the Cloud
App store
Services
sensors
actuators
data sources
(‘Internet of Things’)
Local
FMS
Spraying Advisory
Services
Meteorological
Service
State and Policy
Information Service
FMIS
E-agriculturist Service
for spraying potatoes
FI-Ware enabled
Cloud Platform
Machine Breakdown
Service
User’s
devices
Other
sources
Cloud
FMS

8. Data exchange by ABCDEF’s
• Large organisations mostly have gone digital, with ERP and
other systems
• But between organisations (and especially with SME) data
transfer and information exchange is often on paper
• While more data exchange to monitor business processes in the
chain would be welcome
There is a need for ABCDEF’s:
Agri-Business Collaboration and Data Exchange Facility
FIspace is such a collaboration facility, built in the FI-PPP

9. How more data contributes to current business models
Logistics
solution
providers
Farmer Food processor Retail / consumer Software
Provider
Transport
Transport Transport
Input industries
GRIN Small Cost price Service cope with retail
loyalty
Feed the growing world Sustainability Food Safety Health
Precision Farming:
better control
Better management
decision
Sophisticated
Technology,
More advise
Segment
products and
input suppliers;
Benchmark with
competitors
Consumer
decision support
(pre- and after
sales)
Better service concepts, e.g. in
store replenishment

10. Development pig industry EU-15 versus EU-12N
[2001= 100 (production); 2005 =100 (breeding)]
130%
120%
110%
100%
90%
80%
70%
60%
50%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013f
Production EU-15 Production EU-12N Production EU-27
Breeding herd EU-15 Breeding herd EU-12N Breeding herd EU-27
Source: GIRA

11. Relocating pig production?
Feed Labour Meat
?

12. Decreasing pig
production in CEE
• Bad structure of primary pig industry: a lot of
backyard production especially in Romania;
• Lack of good infrastructure: genetics, feed,
veterinarians, equipment, traders, transport,
slaughterhouses, processing industry;
• Continuous increasing demand regarding
quality, hygiene standards, labelling,
endemic diseases and contagious diseases
from government and retail;

13. However...
• Good external circumstances for pig fatting
in Central Eastern Europe;
• Pig meat is a highly competing and
saturated market in EU;
• There are barriers to expand in Central
Eastern Europe (finance, knowledge, chain
cooperation).
• With Western management and equipment
competing cost prices can be realised.

14. Average share direct farm payments in Net Value Added.
Farms with direct farm payments, 2009-2011. Source:
FADN

15. Expectations CAP after 2020
• Further conversion of farm payments on a hectare base
over Europe
• More greening
• Part of the money goes to land owners
• More and more questions will be raised on the need to pay
big farms big amounts of money.
ALTERNATIVE:
• Fixed budget for income support and restructuring
– Focus on small farms
• Fixed budget for risk and innovation management
– Focus on large farms

16. Restructuring fund needed to support income towards
level of national minimum income.
Y-axis gives family income from agriculture.
X-axis gives percentage of farms.
Bleu line is family income.
Black line is minimum income.
Red area gives necessary budget

17. Distribution of budget over restructuring and
risk and innovation management
Budget (*mio €)
Pillar II Pillar I % Pillar I
Total Total Restructuring Risk fund Restructuring Risk fund
Czech Republic 306 873 42 831 5 95
Denmark 90 880 189 692 21 79
Germany 1.169 5.018 1.284 3.735 26 74
Greece 598 1.947 1.064 883 55 45
Spain 1.182 4.893 1.096 3.798 22 78
France 1.428 7.437 1.459 5.978 20 80
Hungary 491 1.269 221 1.048 17 83
Ireland 312 1.211 774 438 64 36
Italy 1.500 3.704 2.193 1.511 59 41
Netherlands 86 732 441 291 60 40
Austria 567 692 630 62 91 9
Poland 1.556 3.062 1.397 1.664 46 54
Portugal 582 599 241 359 40 60
UK 366 3.592 285 3.307 8 92
Remaining countries 3.056 6.539 2.545 3.994 39 61
EU27 13.289 42.450 13.859 28.591 33 67

18. Distribution Pillar I budget over
restructuring and risk.
Per ha. Average EU27
EU27 US
Pillar I (€/ha) 228
Restructuring/Income goal (€/ha) 74
Risk premium (€/ha) 153 50
Production value (€/ha) *) 2.500 653
Risk premium (% production value) 6,1 7,6
*) Average production value per ha UAA in 2020 in EU27, CAPRI baseline;
Average production value corn in the US in 2011

19. Alternative CAP
• Within Pillar I it is possible to allocate budget
specific for risk management on large farms and
social security / restructuring on small farms
• Taking into account normal standard of living
(assuring minimum income) in agriculture results
in a budget distribution of 2/3 risk management
and 1/3 social security
• Further research and underpinning is necessary

20. The future of AKI
• Is in doing this type of policy research
• As agri-food becomes more and more a
business, sustainability is a licence to
produce and sell, not a source of additional
income.
• FADN will help to check sustainability (we’re
happy to collaborate in the FLINT project)
• Public-private partnerships will become
more common with the agri-food industry

21. The future of AKI
• Is more and more in European consortia:
ERAnets and JPI pool national funds
• New issues will arise in new policy areas
like:
– the biobased economy
– rural poverty
– the relation between food and health.
– food and geo-politics

22. Thanks for
your
attention
krijn.poppe@wur.nl
www.wageningenur.nl/lei
Slides will be available on
Slideshare